[Direct answer]In the Beijing area, it is important to determine whether the performance evaluation system is effective: If the performance evaluation system is established through democratic procedures, publicly disclosed to employees, with clear evaluation standards and fair procedures, then deducting the performance-based portion according to the system is justified and legal. However, if there is no system, the standards are vague, the procedures are arbitrary, or if the deducted portion is from the fixed salary and the amount after deduction is lower than the minimum wage, this constitutes withholding wages. It's also important to distinguish between deducting performance bonuses and terminating employment due to "incompetence": If an employee is transferred to a new position without undergoing training, there's a high risk of legal liability for compensation.

1. Problem background and typical scenarios

At the end of the year, if an employee is evaluated as "unqualified", their entire monthly performance bonus will be deducted, their year-end bonus will be cancelled, and they may even be dismissed for "being unable to perform their duties". The employees feel unfairly treated, while the company believes its actions are justified. The legal boundaries of performance management are as follows: wages are a core term of the labor contract, and adjusting them requires institutional and procedural support, rather than simply labeling an employee as "unqualified".

II. Key points of dispute

First, the legal requirements for deducting performance bonuses. Second, the structural distinction between performance-based wages and fixed wages. Third, the relationship between failing the performance evaluation and being dismissed due to incompetence. Fourth, the employee's remedies.

III. Professional analysis by Henglue Law Firm

The first layer concerns the four legal requirements for performance appraisal: 1. **Legal basis**: The performance appraisal system must be established through democratic procedures (e.g., employee representative meetings or collective discussions with unions/representatives) and publicly announced. Employees must sign the training records. 2. **Clear standards**: Key indicators, scoring rules, and the link between performance and wages must be specified in the system or contract. Arbitrary "leader's impression scores" are unacceptable. 3. **Fair procedures**: The appraisal must follow the system's rules (scoring, confirmation, and appeal channels) and the results must be communicated to employees with signed receipts. 4. **Bottom-line constraints**: After deductions, the monthly salary must not fall below the local minimum wage and fixed components cannot be disguised as performance-based deductions. Arbitration tribunals and courts respect these four requirements. The second layer concerns wage structure distinctions: - If the labor contract stipulates a monthly salary of 20,000 yuan (fixed portion: 15,000 yuan + 5,000 yuan performance-based), the performance-based deductions must follow the system's rules, while the fixed portion cannot be deducted. - If the contract lacks a structured wage breakdown, the company unilaterally creating a "performance" deduction category violates the contract and requires employee consent. Retroactive changes to the structure are a common source of performance disputes. - Year-end bonuses must follow contractual or system rules. Purely discretionary "boss's red envelopes" are acceptable, but unilaterally canceling existing bonuses based on poor performance violates the law and triggers 2N compensation. - In practice, "automatic dismissal based on poor performance" is highly illegal. Performance evaluations are merely evidence of incompetence, not grounds for termination. The third layer concerns termination for poor performance and incompetence: - Performance-based deductions (wage allocation issues) and termination for "inability to perform" (position adjustment issues) are separate. - Under Article 40 of the Labor Contract Law, termination requires prior training or job reassignment, followed by 30-day notice or compensation. - Skipping training and directly terminating violates the law, triggering 2N compensation. - In practice, "automatic dismissal based on performance rankings" is highly illegal. Performance evaluations are merely evidence of incompetence, not grounds for termination. The fourth layer concerns remedies: - Employees should verify the following: - Whether the system is publicly announced and signed. - Whether indicators are predefined. - Whether scoring is reasonable. - Whether deductions exceed legal limits (fixed portion/minimum wage). - If dissatisfied, employees may first file internal appeals (through established channels) and then seek labor arbitration to claim back-pay within one year. - For unlawful terminations, claim 2N compensation. - For employers: - Ensure democratic system procedures and public announcements. - Maintain procedural records. - Operate effective appeal mechanisms. - Respect legal bottom lines. In our labor compliance services, a four-point checklist for performance appraisal systems is a standard offering.

IV. Practical suggestions and legal basis

The first step is to check the system: three checks including democratic procedures, public announcement and signing for receipt, and clear indicators; the second step is to divide the structure: check and deduct the scope of the fixed part and the performance part item by item; the third step is to appeal: leave a record of internal appeals and claim the difference through arbitration; the fourth step is to prevent misjudgment: failing the assessment does not mean that the employment can be terminated, and the procedures for training and job transfer must be fully followed. The main legal basis: Articles 4, 40, and 46 to 48 of the Labor Contract Law of the People's Republic of China, and the Interim Regulations on Wage Payment; the specific application shall be subject to the currently effective provisions.

5. Henglu Law Firm's Reminder

There are three key points regarding performance deductions: First, the system must be well-established (democracy + public disclosure + clarity + procedures), as this provides a basis for deducting performance bonuses. Second, fixed salaries and minimum wages are two red lines. Performance appraisals should not be used as a blanket excuse for deductions. Third, if an employee fails to meet performance standards, the company should first provide training and reassignment before terminating the contract. Skipping these procedures will result in a 2N penalty. Employees who have disputes regarding performance assessments can seek legal recourse through appropriate channels.Labor arbitration and work-related injury compensationThe service obtains a comprehensive solution, which involves the possibility of combining it with compensation for its release.Special servicesFor the plates, you can refer to the relevant information regarding their compliance with regulations.Intellectual property protection and corporate lawFor the column, if you have any questions about its contract terms, please feel free to consult usBusiness and contract disputes in enterprisesTeam.

VI. Frequently Asked Questions

Q1: Can the company deduct the fixed salary from the employee's performance bonus?

It's not allowed to unilaterally split the salary. The salary structure agreed upon in the labor contract cannot be changed without the consent of both parties. Splitting and deducting the salary afterwards is considered withholding wages, and the employee can file for arbitration to claim back the unpaid wages.

Q2: Can employees who perform poorly in the evaluation be dismissed directly?

No. If an employee is unable to perform their duties, they must first receive training or be reassigned to a different position. If they are still unable to perform their duties, the employer may terminate the employment contract and pay compensation in accordance with the law; directly dismissing the employee constitutes an unlawful termination and will result in compensation of 2N.

Q3: Is it legal to deduct performance bonuses until they fall below the minimum wage?

It's illegal. After deductions, the monthly salary must not be lower than the local minimum wage standard. The part that violates the bottom line is invalid, and employees can claim for compensation.

Q4: What should I do if my year-end bonus is disapproved due to the evaluation?

Refer to the basis—if there are clear linkage rules in the system or contract, follow the rules; if there is no basis, you can claim for a blanket cancellation; and there is also discretionary room for issuance according to past practices.

Q5: What should I do if the company deducts money without publicizing the evaluation system?

The system that has not gone through democratic procedures and public announcement is not binding on employees. Accordingly, the wage difference deducted can be applied for arbitration to be reissued. Please pay attention to the one-year statute of limitations and the preservation of evidence.

The above answer is based on the judicial practice in Beijing. The judicial interpretation in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, to avoid missing the statutory time limit. →Labor arbitration legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.